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EXHIBIT 10.2
Effective as of August 24, 2000
Encore Operating, L.P.
c/o Encore Acquisition Partners, Inc.
777 Main Street, Suite 1400
Fort Worth, Texas 76102
Attn: Sam Smith
Re: Credit Agreement dated as of May 7, 1999, by and among Encore
Operating, L.P. ("Borrower"), Encore Acquisition Partners, Inc., as
Parent Guarantor, NationsBank, N.A. (predecessor by merger to Bank of
America, N.A.), as Administrative Agent, First Union National Bank, as
Syndication Agent, BankBoston, N.A. (predecessor in interest to Fleet
National Bank), as Documentary Agent and the financial institutions
listed on Schedule 1 thereto, as Banks ("Banks") (as amended, the
"Credit Agreement"); unless otherwise defined herein, all terms used
herein with their initial letter capitalized shall have the meaning
set forth in the Credit Agreement.
Gentlemen:
Pursuant to Section 5.2 of the Credit Agreement, and subject to the
terms and conditions set forth below, the Borrowing Base shall be $180,000,000
effective August 24, 2000 and continuing until the next Redetermination of the
Borrowing Base thereafter (the "Pioneer Borrowing Base Increase"). Banks further
agree that the Borrowing Base will be increased to $200,000,000 simultaneously
with the payment in full of the Burlington Note (as herein defined) and subject
to the other terms and conditions set forth herein (the "Burlington Borrowing
Base Increase"). Borrower and Banks agree that neither Redetermination provided
for herein shall be construed or deemed to be a Special Redetermination for
purposes of Section 5.3 of the Credit Agreement.
The Pioneer Borrowing Base Increase provided for herein is based on,
and subject to, the satisfaction of the following conditions:
(A) Borrower shall have completed the purchase (the "Subject
Acquisition") of the properties and interests (collectively,
the "Subject Properties") described in that certain Purchase
and Sale Agreement (as amended, the "Pioneer PSA") dated as of
June 9, 2000, by and between Pioneer Natural Resources USA,
Inc., a Delaware corporation, as seller, and Borrower, as
purchaser (the Subject Properties to be purchased by Borrower
pursuant to such Pioneer PSA to include, without limitation,
the Assets under and as defined in such Pioneer PSA), all in
accordance with the terms of the Pioneer PSA, and as a result
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Encore Operating, L.P.
As of August 24, 2000
Page 2
thereof, Borrower shall have acquired good and defensible
title to all such Subject Properties, free and clear of all
Liens except Permitted Encumbrances.
(B) Administrative Agent and its counsel shall have completed a
review of title to that portion of the Subject Properties that
results in Administrative Agent and its counsel having
completed a review of not less than seventy percent (70%) of
the Recognized Value of all Proved Mineral Interests owned by
Borrower after giving effect to the Subject Acquisition, and
such review shall not have revealed any condition or
circumstance which would reflect that, upon completion of the
Subject Acquisition, the representations and warranties
contained in Section 8.9 of the Credit Agreement are
inaccurate in any respect.
(C) Administrative Agent and it counsel shall have been provided
with, and shall have completed a review of, the environmental
reports required by Section 9.13 of the Credit Agreement with
respect to the Subject Properties and such review shall not
have revealed any condition or circumstance which would
reflect that, upon completion of the Subject Acquisition, the
representations and warranties contained in Section 8.14 of
the Credit Agreement are inaccurate in any respect.
(D) Administrative Agent shall have been provided with a copy of
the Pioneer PSA and all other material documents, instruments
and agreements executed and/or delivered by any Credit Party
in connection with the Subject Acquisition, together with a
certificate from an Authorized Officer of Borrower (or the
general partner of Borrower) certifying that such copies are
accurate and complete and represent the complete understanding
and agreement of the parties with respect to the subject
matter thereof.
(E) All fees and expenses of Administrative Agent and its
Affiliates in connection with the Pioneer Borrowing Base
Increase shall have been paid, including, without limitation,
the payment to Administrative Agent of a fee in the amount of
$37,500 for the ratable benefit of the Banks.
(F) The representations and warranties of each Credit Party
contained in the Credit Agreement and the other Loan Papers
shall be true and correct in all material respects prior to,
and upon completion of, the Subject Acquisition, with the same
effect as though such representations and warranties had been
made immediately prior to, and immediately upon completion of,
the Subject Acquisition or, if such representations and
warranties are expressly limited to particular dates, as of
such particular dates.
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Encore Operating, L.P.
As of August 24, 2000
Page 3
(G) Immediately prior to, and immediately upon completion of, the
Subject Acquisition, no Default or Event of Default shall have
occurred and be continuing.
The Burlington Borrowing Base Increase provided for herein is based on,
and subject to, the satisfaction of the conditions set forth in that certain
letter agreement dated effective as of June 1, 2000 by and among Borrower and
Banks, and, without limiting the foregoing, the satisfaction of the following
conditions:
(A) Borrower shall have paid in full that certain Purchase Money
Note (the "Burlington Note") dated March 1, 2000, payable by
Borrower to Burlington Resources Oil & Gas Company
("Burlington") in the original principal amount of US
$35,200,000, and such payment in full shall have been made on
or before the next Redetermination hereafter.
(B) Borrower shall have obtained a full and complete release of
(i) that certain Mortgage, Assignment, Security Agreement and
Financing Statement dated as of March 1, 2000 executed by
Borrower for the benefit of Burlington, and (ii) all Liens
encumbering the Mineral Interests described therein.
(C) All fees and expenses of Administrative Agent and its
Affiliates in connection with the Burlington Borrowing Base
Increase shall have been paid, including, without limitation,
the payment to Administrative Agent of a fee in the amount of
$50,000 for the ratable benefit of the Banks.
(D) No Default or Event of Default shall have occurred which is
continuing.
(E) The representations and warranties of each Credit Party
contained in the Credit Agreement and the other Loan Papers
shall be true and correct in all material respects prior to,
and immediately upon giving effect to, the Burlington
Borrowing Base Increase, with the same effect as though said
representations and warranties had been made immediately prior
to, and immediately after giving effect to, the Burlington
Borrowing Base Increase or, if such representations and
warranties are expressly limited to particular dates, as of
such particular dates.
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Encore Operating, L.P.
As of August 24, 2000
Page 4
Please evidence your acknowledgment of, and agreement to, the foregoing
by executing this letter in the space provided below. This letter may be
executed in counterparts, and all parties need not execute the same counterpart.
Facsimiles will be effective as originals.
Very truly yours,
BANK OF AMERICA, N.A.,
successor by merger to NationsBank, N.A.
By: /s/ J. SCOTT FOWLER
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J. Scott Fowler,
Managing Director
FIRST UNION NATIONAL BANK
By: /s/
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Name:
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Title:
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FLEET NATIONAL BANK,
formerly BankBoston, N.A.
By: /s/
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Name:
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Title:
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THE FROST NATIONAL BANK
By: /s/
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Name:
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Title:
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Encore Operating, L.P.
As of August 24, 2000
Page 4
COMERICA BANK-TEXAS
By: /s/
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Name:
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Title:
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CIBC INC.
By: /s/
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Name:
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Title:
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Acknowledged and agreed effective as of
the 24th day of August, 2000
ENCORE OPERATING, L.P.,
a Texas limited partnership
By: EAP Operating, Inc.,
a Delaware corporation,
its sole general partner
By: /s/
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Name:
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Title:
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